The latest revision of the European Commission pensions directive has removed a contentious requirement for trustees to have a "professional" qualification – reigniting debate in the industry on the merits of a minimum standard of training.
The second Institutions for Occupational Retirement Provision directive, known as IORP II, published in March this year, aimed to align governance, disclosure and cross-border provision across the region’s members.
One of its proposals said that anyone running a pension scheme should have a professional qualification, effectively spelling the end of the lay trustee.
But the revision late last month dropped the "professional" stipulation and placed the requirement on the trustee board as an entity rather than on each individual within it.
Barry Parr, co-chair at the Association of Member Nominated Trustees, said: “We are much more supportive now of the revised wording, with the emphasis on the whole trustee board rather than 'professional' expectations of each and all trustees.”
Parr added that the AMNT has long supported a minimum level of trustee training and said it was a “strong backer” of the Pensions Regulator’s Trustee Toolkit, an online self-directed learning course.
James Walsh, European Union and international policy lead at the National Association of Pension Funds, said that while placing the requirement on the trustee board collectively was a good thing, removing ‘professional’ from the wording could add further uncertainty as to what qualifications would be deemed appropriate.
“They’ve scratched out the word professional… but what ‘qualification’ means is not clear – it’s probably good that it’s not clear because what that means is that national regulators will decide what it means,” Walsh said.
“So it might be for example that our Pensions Regulator might say, ‘If you’ve done our Trustee Toolkit on trustee knowledge and understanding, then that’s one of the qualifications you require’.”
Parr said the AMNT also encourages its members to take the Pensions Management Institute’s trustee certificate, adding: “There could be strong support to look at some CFA [Institute] accreditation also."
But Parr added these qualifications were not “sufficiently strong” in member communications – one of the aspects included in IORP – or in retirement strategies, which will become increasingly important in a post-Budget DC world.
Work in progress
A spokesperson at the Pensions Regulator said it was too early to develop an informed view on how the UK should set any new governance standards, with negotiations on IORP II "far from being completed".
The spokesperson added: “Although the Council of Ministers appears to be close to reaching an initial agreement, the text is likely to change further next year when the European parliament considers the issue and when the Council of Ministers looks at it again.”
The watchdog predicts a final version of the directive is unlikely to be agreed before the end of 2015 or to come into play in member states before around 2017.
The regulator spokesperson pointed to its recent codes of practice for both defined benefit and defined contribution schemes, which they said “place high governance standards at the heart of our regulatory approach”.
Francois Barker, head of pensions at law firm Eversheds, said the draft is on its fourth version and could change again as the Council of Ministers gathers further input from member states.
“This is a new commission, this is not the same commission that put the directive into circulation, so you would expect it to look perhaps with a harsher eye at the directive than if it was its own directive,” Barker said.
“And there’s been speculation in the past that the qualitative impact studies, which are supposed to be done for a directive like this, weren’t carried out properly, and that might in turn cause the commission to take a harder view.”
Barker said that as the directive is subject to change, schemes need not move to comply with the current draft, but added much of what is contained within the directive are “frankly things that trustees should be doing anyway”, including governance, internal controls and communicating with members effectively.
